Silvercorp Short Seller Carnes Cleared of Fraud Allegations

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Jon Richard Carnes, a short seller who anonymously published research accusing companies in China of cheating investors, was cleared of fraud allegations stemming from a 2011 report on Silvercorp Metals Inc.

The British Columbia Securities Commission dismissed the fraud allegations because none of Carnes’ statements or omissions in the Silvercorp report “constitute a prohibited act for the purpose of fraud,” according to a statement Thursday on the commission’s website.

Carnes, operator of the financial blog, had raised questions on the veracity of the Vancouver-based company’s estimated metal reserves in China.

“I feel very relieved,” Carnes said in a brief telephone interview, declining to say more until he has reviewed the ruling with his lawyer.

Lorne Waldman, a spokesman for Silvercorp, didn’t immediately return a call for comment.

Carnes, who lives in the Vancouver area and once worked with Muddy Waters founder Carson Block, has portrayed himself as a champion of investors allegedly wronged by Chinese companies whose shares trade on U.S. and Canadian exchanges. Carnes also sought cash awards by filing whistle-blower claims alleging corporate misconduct with the U.S. Securities and Exchange Commission.

Silvercorp, which has tried and failed to sue Carnes for defamation in the U.S., has previously said that any alleged discrepancies in its metal reserve estimates stemmed from differences in Chinese and North American reporting standards.

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